Does Trump Mean Slump?
Many have been predicting yet more doom and gloom in light of Donald Trump’s election and US president. There’s no doubt his rhetoric in the run up to the vote was controversial, divisive and sometimes disingenuous so it’s perfectly natural that many will be battening down the hatches and pledging not to come out for four years.
But, here in the UK, we’re fortunate to have a yardstick in the Brexit referendum. Yes, the result was a shock of equal proportions and the immediate aftermath in June was much wailing and gnashing of teeth. However, almost six months on, the economic meltdown many predicted hasn’t materialised – at least not yet.
It would be complacent to say that Britain has ridden the storm. The reality is that many commercial enterprises are in “wait and see” mode and, if that continues in the long-term, that’s bound to have an impact as, eventually, less investment will begin to wear down confidence and our willingness to spend money will be eroded.
But there are a number of factors in play in the property market which are likely to mean any drop in house prices will be a long time coming. Indeed, a significant change in Government policy would be required to force prices down quickly so, we’re sorry to say if you’re a first-time buyer, Mr Trump’s victory probably won’t bring you closer to an affordable home within the next few years any more than Brexit has to date.
In short, the UK needs more homes but not enough are being built to meet demand. That means a shortage in supply is driving prices higher. As a result, many of the over 55s are cashing in on their property wealth, downsizing to help younger members of their family get a foot on the property ladder. However, that also puts “silver sellers” in direct competition with first-time buyers, which means stiffer competition for smaller properties, driving prices higher still.
Meanwhile, other savvy over-55s without family to worry about have spotted the fact that fewer homes for sale means younger generations are being forced into rented accommodation. With both revenues and property values rising, buy-to-let has become a far more lucrative option than some pensions, prompting many to cash them in and invest in property instead. More competition for the small to medium-sized home, meaning even higher house prices.
But the most recent phenomena is inactivity. The wait-and-see policies adopted by some of the big corporate players in the wake of Brexit – and now the Trump victory – are being repeated by those thinking of selling their homes, which means the number of houses coming onto the market has slowed. The likely result? Yes, you’ve guessed it. Prices will probably remain high or even continue to rise.
The Government has pledged to build more homes to ease the log jam. New initiatives have also been promised to replace Help To Buy, which folds at the end of next month. However, neither are likely to result in a sudden or dramatic drop in house prices – unless there’s an equally sudden drop in demand. But so many people have seen high prices quash their dreams of home ownership that a slump is highly unlikely; there are simply too many who would jump at the chance of buying their first home or moving up the ladder a rung or two to make an overnight crash likely.
So, if you’re thinking of selling, our advice would be not to worry too much about The Donald or even Brexit come to that. A recent levelling out in house prices month-to-month may have been reported here and there in an alarmist media which forgets to mention the average homes was still worth 5% or more this autumn than it was a year ago.
Be cautious of course. Do your homework and check out the apps on Rightmove and Zoopla which give you an idea of what homes are selling like in your area. But, if you prefer a voice and someone to chat to before you make a decision, just give us a call or drop us a line. We’d be more than happy to help.